Child income tax

victoria18

Hi,

my child  2 is disabled and receive dla shortly with the enhanced monies for mobility. Does this count towards her tax allowance and then will reduce the amount she can save?
any help greatly appreciated 

bowlhead99

DLA (including the mobility component) isn't means tested, so it will not reduce if she has a large amount of savings.

It is also not taxable so if that is her only income aside from bank interest or investment returns, she will still have her full personal allowances and exemptions available for interest income, dividend income, property income distributions and capital gains, and child income tax brackets are same as adults. So for example £12500 personal allowance, £2500 extra personal allowance if blind, £5000 'starter rate of tax for savings income' at 0%, £1000 personal savings allowance, £2000 dividend tax allowance is all still available, so could have £20k+ of savings and investment income without paying tax.  

She also has the full Junior ISA allowance to shelter up to £9000 of savings entirely from tax each year if she promises not to take it out until age 18 - DLA doesn't affect that.

If the money she's saving is a gift from a parent, there is a special rule which taxes investment income amounts (e.g. bank interest) over £100 as if it was the parent's.  However if the money being put away is her own income from DLA, there is no funny business to worry about.